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probability

…and made famous as the St. Petersburg paradox, involved a bet with an exponentially increasing payoff. A fair coin is to be tossed until the first time it comes up heads. If it comes up heads on the first toss, the payment is 2 ducats; if the first time it…

von Neumann–Morgenstern utility function

…aversion comes from the famous St. Petersburg Paradox, in which a bet has an exponentially increasing payoff—for example, with a 50 percent chance to win $1, a 25 percent chance to win $2, a 12.5 percent chance to win $4, and so on. The expected value of this gamble is…